Recruitment Guarantee Period: What Fall-Offs, Refunds and Free Replacements Cost the Firm

When the guarantee clock starts

The length of a guarantee gets the attention in negotiation. The start date can matter as much, because it sets which days the firm is exposed and how those days line up with the client’s payment.

Recognition points differ even between public firms. Kelly Services’ 10-K for fiscal 2025 records permanent placement revenue at the point the candidate begins full-time employment. Kforce’s 10-K treats a Direct Hire placement as complete when the candidate has accepted the position, has resigned from the current employer, and the agreed start date falls within the following month. Neither describes a guarantee clock, but together they show that offer, resignation and first day are three different moments, and an agreement can anchor the guarantee to any of them, or to the invoice date or the payment date.

• From the offer or acceptance date: the window can run partly before the candidate has started.
• From the start date: the window covers the candidate’s first weeks in the job.
• From the invoice date: the window shifts with how fast the firm bills after the start.
• From the payment date: the window does not open until the client pays, so slow payment lengthens the firm’s exposure.

Illustrative example: a fee is invoiced on the start date with net 30 terms, and the guarantee runs 90 days from payment. If the client pays on day 45, the guarantee runs to day 135 after the start, not day 90. A clause that makes the guarantee conditional on payment within terms changes the picture again. Read the firm’s own agreements for which version each client signed.

What counts as a fall-off

A guarantee is triggered by a list of events, and the list differs from one agreement to the next. Each one below is a reason code for the count, and each is worth checking against the agreement’s exclusions.

• The candidate resigns inside the window.
• The client terminates the candidate for performance or conduct.
• The client eliminates the position, lays off the candidate or restructures the role.
• The client changes the job materially from what was described in the search.
• The candidate accepts and then never starts.
• The client asks for a replacement without saying the candidate has left.

Some agreements exclude layoffs and role changes from the guarantee; others are silent, and then the question gets settled on a phone call after the fact. A “no-start” may be treated as a fall-off, as a cancelled placement with no fee, or as neither. Code each event the way it actually happened, then check what the agreement says the firm owed for it.

Count the last 12 months from the ATS and the books

The count needs the placement list from the ATS and the fee and refund lines from the books. One row per placement in the last 12 months, with these columns: client, start date, fee invoiced, date paid, the guarantee terms in that client’s agreement (length, start point, form), whether the candidate left inside the window and why, and what the firm did about it.

• For each refund: the amount and the date it was paid back.
• For each credit: the amount, and whether it has been applied to a later invoice yet.
• For each free replacement: the recruiter hours spent, the submittals made, whether a replacement started, and whether that replacement also fell off.
• For each client: whether its guarantee terms are longer or more generous than the firm’s standard, and whether that was given to win the order.
• For each fall-off handled outside the written terms: what was given, and who agreed to it.

Illustrative example: a firm made 40 placements last year at an average fee of $20,000, or $800,000 invoiced. Six fell off inside the guarantee. Two prorated refunds returned $15,000. One credit of $10,000 sits against a client’s next placement. Two replacements took about 60 recruiter hours each, and one of those replacements left too. One more refund of $8,000 was paid on a fall-off just outside the written window, to keep the client. Before counting recruiter time, that is $33,000, or a little over 4% of the year’s fees, decided mostly by terms nobody had reread since they were signed. The numbers are hypothetical; a firm’s own rows will give its own.

Refunds, credits and the recruiter’s commission

A refunded fee touches the desk as well as the client. If a recruiter was paid commission on the fee when it was invoiced or collected, the firm needs a written rule for what happens when part of it comes back. California’s Labor Code §2751 says that when an employment contract for services in the state involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid, and the employer gives each employee a signed copy and obtains a signed receipt.

Whether a commission can be reduced after a fall-off, and how, is a question for the firm’s employment attorney and depends on the state and the written plan. The operational point is simpler: the count above should include commissions paid on fees later refunded or credited, so the firm sees the full cost of each fall-off in one row.

Terms worth rereading before the next agreement

None of these is a recommendation to tighten or loosen any one term; that depends on the firm’s market and its clients. They are the lines the count will price.

• The start point of the guarantee: acceptance, start date, invoice date or payment date.
• The form: replacement only, prorated refund, full refund or credit, and whether the client or the firm chooses.
• Conditions: payment within terms, written notice of a fall-off within a set number of days, and no hire of the candidate back later without a fee.
• Exclusions: layoffs, eliminated positions, material changes to the role, and the candidate’s termination for reasons the client created.
• Replacement limits: how many replacements, within what time, and whether a replacement carries its own guarantee.
• Client-specific exceptions: every client with terms longer than standard, recorded in the client file with the reason and a review date.

Ask the firm’s attorney to review any change to client agreements before it goes out. The count gives that conversation numbers instead of impressions.

When not to change anything, and when a second look helps

A firm with few fall-offs, terms it can recite from memory, and no refunds outside the written window has no reason to spend on this. Run the count once a year and move on.

It is worth a second look when fall-offs cluster at a handful of clients, when extended terms have spread beyond the clients they were given to, or when refunds sit next to other leaks: conversion fees never invoiced, fees invoiced late after a start, clients paying past terms. The page on staffing agency consulting lays out where a staffing or recruiting firm’s fees and cash wait. The Revenue Review is a read-only engagement that takes two weeks: we read the firm’s own placement, invoice, refund and commission records, price each fall-off and each extended term, and put a monthly dollar figure on each leak, with a written report and a 90-day plan. We do not contact candidates or clients, and contract questions stay with the firm’s attorney. A free 20-minute call is enough to tell whether a Review fits.